The Innovator’s Playground

Rethinking how to win in a time of exponential change

Today, now, this very moment, is the slowest pace of change you will experience in the rest of your life.

Uttered by technology pundits with growing frequency, this phrase is becoming quite real. Reading the headlines, it’s clear an unsettlingly different world is emerging. Amazon is working on a version of its Alexa assistant that can understand emotions. A machine is predicted to join a corporate board of directors within 10 years. Gymnasts in the next Olympics could be judged not by people but by robots that instantaneously scan, plot and analyze the arc of the athlete. Children born today will very probably not learn to drive, nor visit a physician for a checkup when they are 20.

An acceleration is surely upon us. In 10 years, 7 billion people will be seamlessly connected to each other and the entire knowledge of humanity. The concept of “going online” will cease to exist, as we’ll be permanently and invisibly connected to an internet that is an enveloping and ever-present fabric in our lives. Our bodies will become our passwords, with biometric recognition “announcing” our entrance to many environments. We’ll be surrounded by a cloud of data that can know our every preference, habit and behavior, and that tracks and scores aspects of our daily lives. Distributed ledger software, or blockchain, will enable trusted transactions or contracts without any intermediary. Virtual and augmented reality will enable digital experiences that the brain can’t distinguish from real ones, for the price of an iPhone. Genomics, biosensing and bioinformatics will yield near-perfect information about our health. Looking beyond the typical three- to five-year planning horizon, the world starts to look very different.

Therearetwowaysto view this impending change.From one lens, it’s time to play defense. Automation is expected to rapidly erode job security for entire categories of workers, take nearly 50 percent of jobs and wreak havoc on value chains. Retail businesses will see their physical models disrupted by even greater seismic shifts of digital and virtual technologies, completely changing what it means to shop. Increasing transparency will melt away the ties that bind together vertically integrated businesses. Scale-driven manufacturers will see 3D printing create decentralized and fragmented production, making many traditional factories obsolete. Virtually no traditional business will be spared by exponentially accelerating change.

But there’s another lens — a wholly optimistic one. Just as there has never been this degree of change, there has never been this degree of possibility for innovation with tremendous opportunities for new solutions. Drones may raise vexing questions about privacy and the sanctity of personal spaces, but they can deliver a life jacket to a drowning beachgoer or flood victim in a fraction of the time it might take for a lifeguard to respond. If we allow insurers and automakers to access data about our every acceleration, turn and tap of the brakes on the road, we’ll see a more transparent, efficiently priced market for auto insurance and fewer traffic fatalities. Thanks to blockchain applications, the goods we own will manage themselves to our budgets and preferences, ordering their own upgrades and repairs in advance. And just imagine when we can predict our future well-being, monitoring and intervening to improve it by the minute. In the words of technology guru and WIRED founder Kevin Kelly, there has never been a better time to start a business.

But what will it take to win customers in this new world of extreme connectivity and automation? A deep understanding of digital business design and how it’s fundamentally shifting how we live our lives, no doubt. But also a new mentality of relentless curiosity and boldness, even for large corporations, in seizing the opportunity for innovation. For the only viable response is to embrace a more expansive, ambitious sense of purpose; to commit with deep passion and profound optimism to solving the next big, unrecognized and unmet need. Traditional management constructs and tenets about value creation based on “core competencies” will need to give way to entirely different organizational approaches, skills and cultures animated by strategic imagination — a way of thinking and leading that effectively channels the entire energy of an organization into keeping pace with consumers’ ready embrace and absorption of the new and disruptive.

Leaders will need to shift their perspective and understand that the fundamental, in fact only role, of every business is not as a process to be managed, or a product to be produced, but rather as a ceaseless problem-solving machine.

An unstoppable shift to a very different world

Every aspect of life is becoming dominantly digital, at an accelerated pace. Yes we have felt the changes with our media, our music, our communications. But they are much more widespread. The value in the product and services you buy is surrounded with essential ratings and data that drive your choice. The value of the GE jet engine, Caterpillar tractor or Tesla car lies partly in steel, but largely in bits and bytes. The waiter for the restaurant becomes the Seamless application. The branch visit will get replaced by the Skype call; the retail store visit often by the virtual reality session. The pharmaceutical pill has a mini sensor to report if it was absorbed. And when each product or service becomes largely digital, they now can be changed instantly, customized perfectly, remembered forever, produced ubiquitously and connected seamlessly — they come alive with potential.

The shift is inescapable. Over time, every aspect of our world will become more tracked, transparent, automated, unbundled, intelligent and fluid. No regulation, industry structure, or unique asset or skill will hold back accelerating change. Kevin Kelly’s recent book about technological forces is called “The Inevitable” for good reason.

What does this mean for our lives on a daily basis? The six fundamental shifts below offer a picture of the world for which we need to prepare and the attendant opportunities. Although enabled by a growing array of new technologies, the changes will be fueled by human behavior: our unquenchable thirst for a more instantaneous, open, connected and intelligent world.

1. A life in flow

New models of work, sharing platforms and the flexibility of constant connection will upend the traditional world of one job, one house and “my” things. Optionality will become the new stability in a world prioritizing access over ownership and experiences over possessions.

2. Transparent existence

Data will explode, as everything and everyone increasingly becomes tracked and scored. The human desire for social, shared experiences will further the push toward significant transparency, merging public and private while making the world more open, validated and quantified.

3. Omnipotent individual

As products become digital, they will quickly move to platforms, becoming modular, customized and democratized. Distributed ledger technology, relying on the interconnection of far-flung computers instead of central authorities to verify transactions, will further a democratization of trust and decentralization of activity. Production will become flexible and dispersed, customized to the unique wants of controlling, empowered consumers. Customers will wield god-like power over their lives, from their homes to their genes, using it to customize, personalize and co-create. Consumption will become an ongoing act of co-creation.

4. On-demand world

The software world is an immediate world, and everything will get significantly faster. We’ll reward the fastest solutions with our dollars and our data. On-demand access and automated task completion will serve our appetite for the instantaneous, fundamentally changing our time-spend and expectations. We’ll have less to do and more to manage. Much of what we do today will fade into the invisible.

5. Exponential intelligence

AI and connected objects will add intelligence to everything — our possessions, our daily routines and all our decisions. We’ll “know” more than ever, with constant access to the world’s knowledge base and smart digital assistants, shifting whom and how we trust and changing decision-making from a personal deliberation to a collaborative and connected feedback loop. Everything we encounter will be enveloped with data and intelligence, from the products we consume to the pills we take and the services we buy.

6. Synthetic reality

The virtual and real will overlap, expanding our perspectives and opening up new possibilities in identity, monetization, gamification, beautification, information and communication. As the two realms come to seem more indistinguishable, we’ll no longer speak of a “digital” versus “real” identity. Navigating with ease between the two worlds will become another form of multitasking.

As these shifts unfold, they’ll yield a bounty of new innovations and value propositions: platform businesses that enable peer-to-peer production; intelligent agent businesses that optimize and guide a wealth of daily actions; innovative models that trade very personal data for very unique solutions; and whole new services that price and sell trackable outcomes in health, finance and the workplace, among other areas.

Importantly, the big technology and customer shifts don’t just bring about a new or better customer experience, they bring about fundamental change in business models. Fifteen years ago, the invention of sharing technology, content creation tools and bandwidth fast enough to enable video and image sharing didn’t just make for a better rich media experience, it changed what it meant to be a media company. The likes of Facebook and Instagram upended who creates and controls media, and how profit is realized.

Ten years from now, new technologies will bring about business design changes that are even more profound. Blockchain won’t just make transactions more reliable and efficient; it will enable peer-to-peer businesses that bypass intermediaries and potentially make scale economies a thing of the past for many activities. The internet of things, or “IoT,” won’t just make our products smart and connected, it will enable a wealth of service businesses built to guarantee outcomes. Companies need to think deeply and strategically about what these changes portend for the fundamental underpinnings of their business designs.

Mind the gap

As individual consumers, we have shown our ability to handle such exponential change. We soak up new innovations at a staggeringly fast pace. WeChat went from 0 to 1 billion users in China in less than four years. Instagram went from a photo-filtering technology to a communications necessity for half a billion people in three years. As consumers, we’ve been conditioned to embrace and absorb the “new thing” at the touch of a screen.

But while consumers can adopt change exponentially, organizations tend to follow a linear arch. It’s just plain hard to retool products, rethink distribution and move and motivate tens of thousands of individuals at the same pace as consumers adapt to new innovations.

And so… the gap grows quickly.

Strategic imagination

What does it take to close the gap? What skills and strategies are required to get a step ahead?

The extraordinary pace of customer change demands a different model. It cannot be about “plans” in the traditional sense. You can’t pick “the answer” like you used to.

Most big companies base plans off cost data, market sizes and share predictions. But the markets of 10 years from now have yet to be invented, let alone measured. The traditional three-year plan, the SWOT analysis and core competencies don’t encompass what’s actually coming. In fact, core competencies can get in the way. “How do we turn our thousands of stores into an advantage?” may not be the right thought process.

Corporate strategists also no longer have the luxury of watching markets develop and then catching up. IBM was able to patiently watch Lotus pioneer spreadsheet software, then simply acquired the company in 1995 to fuel a transition to a software and service provider. But when it comes to digital models, once a new platform is formed, it can quickly become the dominant and seemingly unassailable standard à la Amazon, Uber, Facebook and Google. Market caps balloon to the point where the upstart standard-bearers are out of reach as acquisition targets for incumbents and would-be competitors — PayPal is worth approximately half the average value of the biggest American banks.

Solving such an unstructured problem is not the province of typical left-brained business analysis. It requires creativity and design thinking on a big scale, mobilizing diverse perspectives and disciplines to invent new models. Waze solved the traffic problem through crowdsourcing real-time data from drivers. Tala is solving lending to the unbanked in Africa with location data and algorithms on cell phones that verify creditworthiness.

Strategic imagination means thinking more deeply about the customer of the future, and committing to an innovation agenda that solves for unrecognized needs, and configuring culture and decision-making styles in new ways. Tomorrow the following disciplines will be essential.

01

Extraordinary sensing

When you are driving faster, you need much stronger headlights

There is no more important question to answer than “What is the big unstated need of tomorrow?” The answer is deep, constant and insatiable inquiry. Does your executive team know what blockchain is and how it’s being applied experimentally? Does it know how Chinese consumers are responding to Alibaba’s latest feature? What the impact of the AADHAR in India has been on data and privacy and authentication? Broadly scanning and deeply probing frontier technologies, frontier consumers and frontier business models has never been more important.

There is no way to anticipate and manage extraordinary change without an extraordinary sensing capability. Extraordinary sensing frames and probes crucial questions, i.e., in the face of all of this change, who will the customer be? What are the problems they don’t know they have? How will they live their lives? How will they behave? What will they need? What will they fear? This means:

Thinking further out.
Elevate strategic imagination over the tactical to push the conversation beyond immediate markets and typical planning horizons. Google’s glasses, Oculus’s VR headsets and Amazon’s drones may seem fanciful until they quickly become real. Augmented reality seems speculative until Pokémon Go appears. The idea of trading personal private data via a smartphone for access to loans in the developing world seems outside the norm until Tala shows it works.

Thinking diversely.
Meld what’s possible with technology with what’s likely in human nature. Bring data and behavioral scientists together for a complete picture.

Suspending constraints in service of true insight.Ignore the usual product, risk and regulatory barriers. Cultivate a point of view from the perspective of being outside the business looking in, and then ask, “What might be?” This mind-set challenges the “It can’t make money,” or “It’s not legal” (Uber circumvents, and then changes, the taxi medallion system), or “It’s not safe” (Airbnb upends the trust equation in hospitality).

Most critically, extraordinary sensing is fueled by a culture of intense, probing curiosity — perhaps the single most important leadership attribute today.

The senior leaders of the Googles, Amazons and Teslas live as sponges, filling their schedules by learning, probing and encouraging. Their a priori assumption is that they’re ignorant, in a sense, and that each new day brings a daunting but exhilarating learning curve.

The executive mind-set at many big companies can be quite different. Executives tend to be rewarded for being decisive rather than exploratory. Their time is spent evaluating and assessing, and they often assume they are knowledgeable. They live as gavels — their role is to judge and conclude.

Extraordinary sensing is more sponge than gravel. It thrives in an environment where opinions, ideation and crucial information are readily solicited and shared. It’s what allows one’s radar to see far enough to envision solutions to problems whose outlines are not yet in focus.

Extraordinary sensing is the tool of the intensely curious, the fuel for the innovator.

02

Expansive, ambitious purpose

The size of the business will be proportional to the size of the problem you aim to solve

The size of the opportunity at hand demands a more ambitious goal. As connected data, people and objects liberate companies to pursue new agendas, the right “guide” is not a traditional corporate vision that defines “the business you are in” but rather an expansive purpose that encompasses an ever-broadening set of unsolved consumer problems. Caterpillar, for example, is leveraging connected technology to transform from an equipment company to a solutions provider accountable for the productivity of farms and mines.

An ambitious purpose expands the nature of the problems you obsess about. As value- creation possibilities proliferate, narrow self-definitions by industry excellence (the best rental car company, the best auto manufacturer, the best bank) become limiting. Today’s high-value-add service is invariably tomorrow’s commodity. The convergence that Apple saw in becoming the camera, navigation system and communication system is coming to every industry. Witness how the processing and transaction capability of a bank is already being subsumed into other functions — the shopping utility of Amazon, the seamless booking of Uber or the sharing of payments among friends via Venmo. An ambitious purpose:

Lays out a goal that can never be completed.The role of the ambitious purpose is not to describe your company but to perpetually fuel exploration and momentum toward the new value space.

Ignores today’s how.
The means by which value is delivered will change and products will become irrelevant. The ambitious purpose that fosters new solutions for customers says nothing about how the job gets done (build a car or create a ridesharing app? Tesla is doing both), and in fact it encourages a new way.

Ignoresthe competition.An ambitious purpose pushes people to look ahead and not around. The stepped-up pace of change means that the threat isn’t a competitor successfully upgrading a product; it’s someone else winning customers’ attention for what matters.

Makes the important work everyone’s work.An ambitious purpose moves the “What should we do?” decisions away from a small number of senior leaders, and it makes coming up with answers the daily work of everyone. It democratizes invention, flattens organizations and liberates every employee to search for the next big solution.

The ambitious purpose is the guide to growth and the defense against irrelevance. It directs energies toward tomorrow’s problems as opposed to yesterday’s products.

03

Digital business design

Digital businesses scale faster, but run by different rules (and all businesses are digital)

A digital business design is not the same as “digitizing” a business, automating the supply chain, boosting CRM, improving app functionality, adding more social to the marketing mix. It means fully embracing different assumptions, even about how money is made. Digital business designs hold these truths to be self-evident:

That the value you create doesn’t need to be created by you.A digital business design recognizes that when everyone is viewed as a producer in a connected system, exponentially more value is created. Platform models, which coordinate networks of participants, scale faster and deliver greater value. Digital models have built-in incentives to collaborate into their models and are exceptionally easy to snap into.

That transparency is a great thing, not a threat.A digital business design seeks to profit from the fact that more data and more transparency are inevitable. The digital mind-set is to grow value by adding data, not to hide value by bundling or trying to be too controlling about information that can help customers make better decisions.

That share of customer attention is the only lasting source of advantage.Digital business designs assume that winning attention means winning the flow of data, which creates the means to win even more attention. Scale economies come from the database size, not the factory size.

That the value is in services, and everything will be a service.Digital tends toward service and subscription models, which are inherently smarter because they build in learning loops and feedback, capture better data and keep iterating to improve quickly. People are Walmart “shoppers” but Amazon Prime “members” — the result is a highly different relationship and ability to grow. Uber learns you, the yellow cab forgets you.

The winning business designs are based on platforms, where advantage is in the orchestration of the whole, no longer the efficiency of any one player. They pivot companies from producers to enablers, and profit models from being producer- centric to customer-centric. They also afford unexpectedly new levels of creativity — the closed-loop business design of the Amazon Dash button trades loyalty and ongoing profit streams for the radical convenience of pressing a button for replenishment.

Living by these rules, which buck conventional wisdom, takes courage. Embrace complete transparency, even if my product scores poorly? The less you make, the better you do? Price for outcomes, not for products? To keep up and get ahead, embracing these assumptions has to become the new normal.

04

Experience artistry

The little things matter a great deal

Our unbundled digital world of tomorrow is a plug-and-play world, a world of assembling the best answer. The best sensors, screens, speakers and cameras are equally available to the iPhone as the Samsung Galaxy, just as the best drivers are to Lyft and Uber; the best restaurants to Seamless and GrubHub; the best risk-management algorithms to Allstate and Progressive. Most pieces are available to most players.

Consequently, it’s the meticulous design of the whole and inventive assembly of the pieces that create the value. The effortless, ergonomically delightful, sensual experience that fits in our lives in a new and unanticipated way will earn our dollars. SONOS, Nest and Echo aren’t just the best “products”; they’re the best experiences. They integrate, simplify and anticipate. The sales call that knew your need the moment it happened, the waived fee just when you needed a line of credit — how everything falls seamlessly into place is what matters.

If there is anything we have learned from our shift into the digital world, it is that seemingly small experience innovations create massive leapfrogs up the curve. Our connected world chooses the remarkable over the good with unexpected speed. Technology that has been on the shelf for several years suddenly accelerates when designed into the simple, effortless solution that takes off: Amazon’s one-click membership model; Tesla’s seamless fusion of batteries, ergonomics and charging stations; Venmo’s drag-and-drop payment simplicity.

“Customer experience” leadership, once thought of as good service or a satisfaction score, is becoming design artistry and craft, a realm of creative problem-solving where scrupulous attention to detail matters and speed and effortlessness can have magical results. Where the passion for every pixel is the difference between winning and losing. And as such, it requires intimate insight into the subtlest emotions and behavioral quirks of the user, rooted in deep human observation.

Importantly, customer experience is now the province of design thinkers and not the operations or service teams. Experience artistry is the new standard, entailing:

Effortless ergonomics.In an age demanding extreme immediacy, the difference between one and two clicks (or no clicks at all) can be the difference between winning and losing.

Unique signature moments.Moments that create special experiences and differentiate in new and unexpected ways.

A unique and human brand voice.As brands digitize, ironically, they can begin to humanize, becoming more personal and more real. The unique behavior, the voice and attitude of the experience start to matter.

The moment of acceleration and leapfrog comes from innovating the experience with true craft and artistry. In tomorrow’s world, the idea of “customer experience” is not a discipline or a department or a satisfaction score, it is the main job a company undertakes to create value and leapfrog.

05

Relentless problem-solving

The cultures that thrive under uncertainty share a relentless pursuit of experimentation

If the purpose of a company is to embark on an endless journey to keep sensing and solving problems, achieving and maintaining success requires a different culture and way of managing and organizing. It requires a view that an organization is a solving machine, not a production machine. That rules are for changing, not following. That yesterday’s approach is by definition worse than tomorrow’s.

The processes of most of today’s businesses are built for a world of probability, quality assurance and risk management. Where demand can be forecasted and stage gates assure it will be effectively met. They are built to be “right” and to minimize risk of failure. But cultures that thrive under uncertainty caused by rapid change are fundamentally different. A culture of relentless problem-solving means:

Learning over knowing.

While structured product roadmaps and stage-gated processes are designed to deliver (on time and on budget), an innovator’s toolkit of broad experimental portfolios, beta quality prototypes, throngs of collaborators and co-creation sessions is built to discover. The latter is starting to matter a lot more.

Tapping collective intelligence.Greater collaboration, bottom-up empowerment and freedom to stray and to solve are all critical to tackling the big unsolved problems. Companies need to systematically adjust behavior, policies, processes, workspace design, training and communications practices, with the aim of making innovation efforts as inclusive as possible.

Deep empathy.In a “we must find a way” culture of solving, true empathy means caring about the customer’s life enough to keep iterating and trying, knowing that there’s always a better way just waiting to be discovered.

Speed before perfection.In the physical world, product speed and organizational speed were largely in sync. It took years to design and retool to make a car, and the pace of mobilizing the tens of thousands of people involved mirrored that timetable. But as products become digital and development and launch cycles compress, expedited piloting and iterating on the fly trumps perfection.

These five disciplines aren’t the province of the start-up or “new economy” companies. They represent a new and essential organizational mind-set, applicable to all businesses striving to cultivate the most important ingredient for success: a culture of open, optimistic and relentless experimentation.

Welcome to the beginning

Viewed through a historical lens, the degree of change upon us now will certainly surpass what was encountered in the Industrial Revolution. When we debate how much the “millennial” or “centennial” consumer is truly different from the rest of us, consider the shock and wonder of the young person leaving the farm for the factories of London in the early 1800s, realizing that one no longer needed to make his or her own furniture or clothes. And when we ask ourselves how much business models are really changing, consider that the very idea of the corporation, the LLC, was illegal until 1825. Today, we are still at the beginning of an even more far-reaching transformation in customer needs and the models that will serve them.

The number of unsolved needs, and the new potential to solve them, is simply exploding. For those with strategic imagination, something great is just beginning.